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Pursuant to a congressional request, GAO reviewed the Department of Energy's (DOE) actions to correct Naval Petroleum Reserve No. 1 (NPR-1) production data inaccuracies which GAO believed: (1) resulted from a lack of effective internal controls; (2) caused incorrect computation of NPR-1 maximum efficient production rates; and (3) could result in the government's not receiving its entire share of remaining recoverable reserves if NPR-1 were sold.

GAO found that DOE promptly initiated actions to correct data inaccuracy problems, including: (1) rewriting computer programs; (2) conducting tests of corrected data to validate the production accounting system's accuracy; (3) developing new allocation factors for the production accounting system; (4) establishing standards for developing new allocation factors; and (5) validating all historical monthly production data. GAO also found that DOE: (1) will take almost a year to complete all corrective actions and will require additional time to measure the effectiveness of its newly implemented internal controls; (2) did not detect certain errors in allocation factors that had cleared its review process; and (3) has not exercised a study contract option that would provide it with the specific geological data it needs to protect the government's interests if it should choose to sell or manage the reserve.

Recommendation for Executive Action

Status: Closed - Implemented

Comments: DOE exercised option IVa of the contract so that additional geological and engineering data about the reserves could be obtained. However, DOE let the contract expire without exercising the phase IVb option.

Recommendation: The Secretary of Energy should authorize the Director, Office of Naval Petroleum and Oil Shale Reserves, to exercise the government's option for phase IVb under the current contract to obtain more detailed geologic and engineering data needed to accurately determine the ownership of oil produced to date.